First National Trustco (UK) Ltd v Kevin Page (on his own behalf and as representative for all other members of the unincorporated association known as Bahia Blanca Holiday Club)

JurisdictionEngland & Wales
JudgeMiss Joanna Smith
Judgment Date20 May 2019
Neutral Citation[2019] EWHC 1187 (Ch)
CourtChancery Division
Docket NumberClaim No: HC-2017-002735
Date20 May 2019

[2019] EWHC 1187 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (ChD)

Rolls Building

Fetter Lane

London EC4A 1NL

Before:

Joanna Smith QC sitting as a Deputy Judge of the High Court

Claim No: HC-2017-002735

Between:
(1) First National Trustco (UK) Limited
(2) Bahia Blanca Club B Limited
Claimants
and
(1) Kevin Page (on his own behalf and as representative for all other members of the unincorporated association known as Bahia Blanca Holiday Club)
(2) Paul Donald Page
(3) Bahia Blanca Leisure Limited
(4) Bahia Blanca Leisure SL
Defendants

Mrs Talbot Rice QC and Mr Ben Waistell (instructed by Keystone Law LLP) for the Claimants

Mr Alan Gourgey QC and Mr Jack Watson (instructed by Ashtons Legal) for the Defendants

Hearing dates: 20, 21, 22, 25, 26, 27, 29 March and 2 April 2018

APPROVED JUDGMENT

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated authentic.

Deputy Judge Miss Joanna Smith QC:

Introduction

1

At its heart, this dispute concerns three main issues as follows:

(i) First – the question of where the liability should fall for taxes levied on the Second Claimant, Bahia Blanca Club B Limited (“ BBCB”) by the Spanish Tax Authorities (“ the Spanish Taxes”) in the sum of €2.7m in respect of various timeshare apartments (“ the Apartments”) at the Bahia Blanca Timeshare Resort in Gran Canaria (“ the Resort”). In short, the Claimants (whose roles in the timeshare structure I shall return to in more detail later) say that the timeshare owners, who are members of the Bahia Blanca Holiday Club (“ the Club”) are obliged to indemnify them in respect of that liability. This claim is pursued against the First Defendant, Mr Kevin Page (“ Kevin Page”), on his own behalf and as a representative of the members of the Club which is an unincorporated association, and the Third Defendant, Bahia Blanca Leisure Limited (“ BBLL”), a company now standing in the shoes of the Founder Member of the Club which is itself owned and controlled by Kevin Page and his brother, the Second Defendant (“ Paul Page”) (together “ the Pages”).

(ii) Second – the question whether the Fourth Defendant, Bahia Blanca Leisure SL (“ BBL SL”), a Spanish company also owned and controlled by the Pages, should be ordered to transfer the Apartments back to BBCB in circumstances where it is alleged that it purchased the Apartments in late 2015 knowing of a breach of trust on the part of the Claimants such that it now holds the Apartments on constructive trust for the Claimants. This involves an allegation of knowing receipt. Until the third day of the trial the Claimants also pursued a claim of dishonest assistance against BBL SL and the Pages, but this allegation was dropped by way of amendment in the form of a Re-Re-Amended Particulars of Claim (“ the RRAPoC”) in respect of which I gave permission on the third day of the trial. For present purposes it is important to note that the upshot of this amendment was that the personal claim against Paul Page was dropped (although he remained a Defendant to the claim in the RRAPoC) and that changes were made to the plea of knowing receipt. Whilst these changes were not objected to by the Defendants on the pragmatic grounds that to do so might disrupt the trial, nevertheless they made it clear that it would be their case (and had always been their case) that the knowing receipt claim had no real prospect of success. I shall return to this later.

(iii) Third – the entitlement of the First Claimant, First National Trustco (UK) Limited (“ FNTC”) to recover payment of outstanding remuneration and expenses which are said to be due and owing to it by the Club.

2

Stating the issues shortly as I have done above, however, belies the very considerable complexity of the legal arguments arising, in particular, in relation to the first two issues. This complexity is a function, in part, of the way in which the Claimants' case has developed throughout the litigation, with substantive amendments being made to the legal arguments right up to the production of the RRAPoC at trial. The List of Issues in the trial bundle identified 25 issues (some with numerous sub-issues) which the court was required to decide and although an effort was made in relation to the first main issue identified above (liability for the Spanish Taxes) to refine the various sub-issues (in a document which was agreed by the parties after the trial and is attached hereto at Appendix 1 (“ App 1”)), there remain numerous hotly disputed issues of law and fact to be addressed.

3

Whilst the Claimants' written submissions were relatively concise, the Defendants written opening skeleton ran to 133 pages and their written closing submissions ran to 177 pages. Together, the parties provided me with approximately 90 authorities in the form of six lever arch files at the commencement of the trial, together with two additional supplemental bundles of authorities in advance of oral closing submissions. It was agreed that oral closings would last for 1 day each, subject to the Claimants being given a short time at the end to reply, but this was nevertheless insufficient time for all of the numerous arguments to be adequately covered, much less for me to be taken in detail through the authorities. I have taken all of these materials into account in producing this judgment although it is obviously not necessary or appropriate for me to refer to everything.

4

By way of a route map, I deal with the factual background in section A, the witnesses in section B, the issue of the entitlement to an indemnity in respect of the Spanish Taxes in section C, the claim of knowing receipt in section D and the claim for fees and expenses in section E.

A. Factual Background

5

Before I can consider the outstanding issues, I must address the factual background to the claim, which involves looking in some detail at the timeshare structure, the suite of documents which put the timeshare structure in place and the various roles of the main protagonists in relation to that structure.

The Creation of the Club and its Structure

6

In Spain, timeshare resorts are commonly held pursuant to a club trust structure, which I understand from the evidence to have been widely used since the mid 1980s. Pursuant to this structure, the formal ownership of individual apartments is vested in and maintained by an owning company (or companies) the membership of which is limited to an independent custodian trustee which holds and controls the owning company in trust for the benefit of the Members of the club from time to time. This ensures that the apartments can be made available for the benefit of members of the timeshare club, who each purchase occupation rights over the apartments in the form of individual weeks. The members of the timeshare club thus enjoy rights of occupation and are subject to the rights and obligations set forth in the constitution of the club.

7

The Resort in this case was created in or about 1988 for the purpose of making the Apartments (which it seems at this time were still in the process of being developed) available to members of the public who could purchase timeshare weeks. TS International Plc (which later changed its name to TS International Ltd) (“ TSI”) was the owner of the property on which the Apartments were built and the Founder Member of the Club.

The 1988 Constitution

8

The Club was established by a Constitution dated 1 January 1988, executed by TSI and governed by English law (“ the Constitution”). The Constitution governed the rights of Members of the Club and the role of the Committee, which was to carry out the decision making in respect of the Resort. The Club was to be a non-profit making club whose object was to secure for its Members the ownership of exclusive rights of occupation of the Apartments for “ such specific periods in each year as shall be allocated to Members in perpetuity”.

9

Pursuant to the 1988 Constitution, TSI as Founder Member, agreed to transfer the Apartments (as identified from time to time in an Appendix annexed to the Constitution in the Fourth Schedule) to the “Owning Company”, as defined, which TSI agreed to procure would not engage in any trading activity, but would keep the Apartments free from any mortgage, lien or encumbrance.

10

I shall return to the detailed provisions of the Constitution later in this judgment, but for present purposes suffice to say that the Owning Company was defined as “Midmark 10 Limited” (“ Midmark”), a company limited by guarantee and incorporated in Scotland. Membership of the Owning Company was to be limited to an independent custodian trustee or joint trustees (“ the Trustee”) who was to “ hold and control the Owning Company in trust for the benefit of the Members of the Club from time to time upon the terms of the Deed of Trust”. The Trustee, identified in the Constitution as Midland Bank Trust Company Limited and Landmark Title & Trust Limited, together acting as joint trustees, was obliged to use its control over the Owning Company to permit the Members' occupation of the Apartments.

11

In consideration for the transfer of the Apartments to the Owning Company and ownership of the Owning Company being vested in the Trustee, TSI was entitled to 51 Membership Certificates created in respect of each Apartment transferred (51 for each Apartment corresponding to the number of weeks available). TSI could sell those Membership Certificates to members of the public and was entitled to all unsold Membership Certificates in relation to each Apartment.

12

A Membership Certificate entitled the Member to use and occupy the relevant apartment for a specified week in each year. Individual purchasers of timeshare weeks (“ the Ordinary Members”) were granted...

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